The impact of CEO turnover on firm performance around interim successions
Purchase on Springer.com
$39.95 / €34.95 / £29.95*
Rent the article at a discountRent now
* Final gross prices may vary according to local VAT.
Prior research reports that financial performance of firms that hire interim CEO successors is worse following interim CEO appointments than those that hire permanent successors. We find that this underperformance occurs only following voluntary turnover interim appointments, which represent a small fraction of all voluntary turnovers and roughly a quarter of all interim appointments. We do not observe poor performance when boards hire interim successors following instances of forced departure. Further analysis shows that poor performance during voluntary turnover interim successions are limited to using operating performance measures; market performance is not significantly worse following interim successions. Our results indicate that many interim appointments should not be viewed as value decreasing endeavors and future research on post-succession financial performance should consider the circumstances surrounding the turnover of the predecessor.
- Agrawal, A., Knoeber, C., & Tsoulouhas, T. (2006). Are outsiders handicapped in CEO successions? Journal of Corporate Finance, 12, 619–644. CrossRef
- Arthaud-Day, M., Certo, S., Dalton, C., & Dalton, D. (2008). A changing of the guard: Executive and director turnover following corporate financial restatements. Academy of Management Journal, 49, 1119–1136. CrossRef
- Ballinger, G., & Marcel, J. (2010). The use of an interim CEO during succession episodes and firm performance. Strategic Management Journal, 31, 262–283. CrossRef
- Bell, D., Raiffa, H., & Tversky, A. (1988). Decision making: Descriptive, normative, and prescriptive interactions. Cambridge, UK: Cambridge University Press. CrossRef
- Boeker, W., & Goodstein, J. (1993). Performance and successor choice: The moderating effects of governance and ownership. Academy of Management Journal, 36, 172–186. CrossRef
- Cannella, A., & Lubatkin, M. (1993). Succession as a sociopolitical process: Internal impediments to outsider selection. Academy of Management Journal, 36, 763–793. CrossRef
- Cannella, A., & Shen, W. (2001). So close and yet so far: Promotion versus exit for CEO heirs apparent. Academy of Management Journal, 44, 252–270. CrossRef
- Carpenter, M. A. (2002). The implications of strategy and social context for the relationship between top management team heterogeneity and firm performance. Strategic Management Journal, 23, 275–284. CrossRef
- Charan, R. (2005). Ending the CEO succession crisis. Harvard Business Review, 83, 72–81.
- Clayton, M., Hartzell, J., & Rosenberg, J. (2005). The impact of CEO turnover on firm volatility. Journal of Business, 78, 1779–1808. CrossRef
- Dalton, D., & Dalton, C. (2007). CEO succession: Some finer—and perhaps provocative—points. Journal of Business Strategy, 28, 6–8. CrossRef
- Davidson, W., Nemec, C., Worrell, D., & Lin, J. (2002). Industrial origin of CEOs in outside succession: Board preference and stockholder reaction. Journal of Management and Governance, 6, 295–321. CrossRef
- Denis, D., & Denis, D. (1995). Performance changes following top management dismissals. Journal of Finance, 50, 1029–1057. CrossRef
- Dennis, S., Nandy, D., & Sharpe, I. (2000). The determinants of contract terms in bank and revolving credit agreements. Journal of Financial and Quantitative Analysis, 35, 87–110. CrossRef
- Fama, E. F., & French, K. R. (1992). The cross-section of expected stock returns. Journal of Finance, 47, 427–465. CrossRef
- Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33, 3–56. CrossRef
- Fama, E. F., & French, K. R. (2008). Dissecting anomalies. Journal of Finance, 63, 1653–1678. CrossRef
- Gephart, R. (1978). Status degradation and the organizational succession: An ethnomethodological approach. Administrative Science Quarterly, 23, 553–581. CrossRef
- Gouldner, A. (1952). The problem of succession in bureaucracy. In R. Merton (Ed.), Reader in bureaucracy. Illinois: Free Press.
- Guest, R. (1962). Managerial succession in complex organizations. American Journal of Sociology, 68, 47–54. CrossRef
- Hambrick, D., & Finkelstein, S. (1987). Managerial discretion: A bridge between polar views of organizational outcomes. Research in Organizational Behavior, 9, 369–406.
- Huff, J. O., Huff, A. S., & Thomas, H. (1992). Strategic renewal and the interaction of cumulative stress and inertia. Strategic Management Journal, 13, 55–75. CrossRef
- Huson, M., Malatesta, P., & Parrino, R. (2004). Managerial succession and firm performance. Journal of Financial Economics, 74, 237–275. CrossRef
- Intintoli, V. (2012). The effects of succession choice surrounding CEO turnover announcements: Evidence from marathon successions. Forthcoming: Financial Management.
- Jacquemin, A., & Berry, C. (1979). Entropy measure of diversification and corporate growth. Journal of Industrial Economics, 27, 359–369. CrossRef
- Kesner, I., & Sebora, T. (1994). Executive succession-past, present, and future. Journal of Management, 20, 327–372.
- Lubatkin, M., Chung, K., Rogers, R., & Owers, J. (1989). Stockholder reactions to CEO changes in large corporations. Academy of Management Journal, 32, 47–68. CrossRef
- Miller, D., Kets de Vries, M., & Toulouse, J. (1982). Top executive locus of control and its relationship to strategy-making, structure and environment. Academy of Management Journal, 25, 237–253. CrossRef
- Ocasio, W. (1999). Institutionalized action and corporate governance: The reliance on rules of CEO succession. Administrative Science Quarterly, 44, 384–416. CrossRef
- Ocasio, W., & Kim, H. (1999). The circulation of corporate control: Selection of functional backgrounds of new CEOs in large U.S. manufacturing firms, 1981–1992. Administrative Science Quarterly, 44, 532–562. CrossRef
- Parrino, R. (1997). CEO turnover and outside succession: A cross-sectional analysis. Journal of Financial Economics, 46, 165–197. CrossRef
- Pfeffer, J., & Salancik, G. (1978). The external control of organizations: A resource dependency perspective. New York: Harper & Row.
- Pitcher, P., Chreim, S., & Kisfalvi, V. (2000). CEO succession research: Methodological bridges over troubled waters. Strategic Management Journal, 21, 625–648. CrossRef
- Shen, W., & Cannella, A. (2002). Power dynamics within top management and their impacts on CEO dismissal followed by inside succession. Academy of Management Journal, 45, 1195–1205. CrossRef
- Simon, H. (1997). Administrative behavior: A study of decision-making in organizations (4th ed.). New York: Free Press.
- Vancil, R. F. (1987). Passing the Baton: Managing the process of CEO succession. Boston, Massachusetts: Harvard Business School Press.
- Wiersema, M. F. (1992). Strategic consequences of executive succession within diversified firms. Journal of Management Studies, 29, 73–94. CrossRef
- Zajac, E., Kraatz, M., & Bresser, R. (2000). Modeling the dynamics of strategic fit: A normative approach to strategic change. Strategic Management Journal, 21, 429–453. CrossRef
- Zhang, Y., & Rajagopalan, N. (2004). When the known devil is better than the unknown god: An empirical study of the antecedents and consequences of relay CEO successions. Academy of Management Journal, 47, 483–500. CrossRef
- The impact of CEO turnover on firm performance around interim successions
Journal of Management & Governance
- Print ISSN
- Online ISSN
- Springer US
- Additional Links
- CEO turnover
- Interim succession
- Corporate governance
- Industry Sectors